February 24, 2015
New Jersey Gov. Chris Christie said Tuesday during his annual budget address in Trenton that he wants to "freeze" the state's faltering pension system and is calling for a constitutional amendment to make his spending plan work.
The announcement comes a day after a state judge ruled Christie violated a law he helped pass and must now find about $1.5 billion more in the state’s already tight budget to put toward the public employee pension system.
Christie said that he found a path forward with an organization he has criticized publicly in the past – the teacher's union. He said a new "Roadmap for Reform" plan has earned the New Jersey Education Association's approval following negotiations between the teachers and a commission Christie appointed to look for savings in the state's pensions and health benefit plans.
"The roadmap calls for the existing pension plan to be frozen and to be replaced by a new plan," Christie said. "Both the existing plan and the new plan would be transferred to a trust overseen by the [New Jersey Education Association]."
Christie and the NJEA have had an acrimonious relationship since he was elected governor in 2009 – they've repeatedly clashed over Christie's efforts to curtail benefits and overhaul tenure rules.
"I know we can get this done," Christie said. "We have proven time and again that even when we look like we're not going to make it work and that politics and partisan interests have won, we flip the script."
The NJEA denied that any agreement is in place.
“Throughout our discussions with the commission, we have focused on policy approaches that will benefit the state and our members," union president Wendell Steinhauer said, in a statement released this afternoon. "Unfortunately, today politics trumped policy. NJEA is deeply disappointed that Gov. Christie overstated the nature of the understanding we reached with the commission after many months of conversation. We stand by our statement earlier today, which clearly and accurately outlines the nature and extent of our discussions and our commitment to future discussion.
“We have not agreed to any changes to pensions or health benefits," Steinhauer continued. "We have only agreed to continue looking at all solutions that may provide our members with more stable pensions and affordable, high-quality health benefits. The solutions proposed by the commission are complex, and they will require a much greater commitment from the state than has been shown in recent years. For this process to succeed, all parties will have to conduct themselves with the utmost honesty and clarity in order to build trust and allow real solutions to emerge.”
Christie’s proposed budget is $33.8 billion, an increase of 3.1 percent from the previous year.
“It includes no new taxes on the people of New Jersey,” he said in his address.
The governor’s budget emphasizes a commitment to drug treatment and education, Christie said, and reduces funding to the Department of Law and Public Safety and the Department of Transportation.
What was not addressed in Christie’s speech was how to revive the Transportation Trust Fund, which is about to run out of money to finance new infrastructure projects on the state’s roads and bridges.
In his address, Christie called for a $1.3 billion payment to the pension system for fiscal year 2016 and for budget savings out of healthcare costs.
"The roadmap also recognizes that the State must achieve sufficient savings in health care costs if we are going to be able to pay off the unfunded pension liability and to make required contributions to the new plan," Christie said. "It is expected that the unions will work with representatives from the State ... to attain the required savings in health care costs from a variety of sources – including embracing innovative plan-design initiatives, wellness programs and other ways of providing incentives to participants to stay healthy."
To finalize the deal, Christie called for a constitutional amendment.
The roadmap, Christie said, "requires the State to make periodic contributions each fiscal year to the Trust in order to pay off the unfunded liability of the existing plan over a period of 40 years. To ensure the State meets this obligation and the payment is enforced, a Constitutional Amendment would be voted on this November."
Christie was dealt a setback earlier by a state court judge, who ruled that his plan to cut $1.6 billion of contributions to the state retirement system violated the state constitution. The cuts were one of the lynchpins in his effort to close a $2.7 billion budget gap projected through fiscal 2015.
"The court cannot allow the State to simply turn its back on its obligations to New Jersey’s public employees," Superior Court Judge Mary Jacobson wrote.
Christie has repeatedly denounced the state’s pension funds as broken and a strain on taxpayers in need of reform.
There are major divides between Democrats and Republicans on how to fix the state's pension crisis - Democrats have proposed a millionaires tax, while Christie and Republicans have argued the state cannot tax its way out of the problem and that benefits may need to change.
Democrats have argued against benefit cuts, saying they’ve already been down this road before with Christie. In Christie’s first term, pension reform was enacted that forced some public employees to pay more and required the state to make scheduled contributions in an effort to stabilize the whole system. After the deal, both sides praised the move.
Democrats say Christie hasn’t held up his side of the bargain because the state’s contribution was cut – Christie said he had no choice and cited budget shortfalls. It was this decision by Christie to cut the state’s contribution that was overruled by a judge Monday.
On top of everything else, all of Christie’s words and ideas will be scrutinized by national media because he is likely running for president. His fiscal record in New Jersey will surely be a part of any campaign he might run.
“The governor will continue to work on a practical solution to New Jersey's pension and health-benefits problems while he appeals this decision to a higher court where we are confident the judgment of New Jersey's elected officials will be vindicated,” Christie’s spokesman Michael Drewniak said, according to NJ Spotlight. Drewniak added that the judge’s decision was another example of judicial activism.
Reuters contributed to this report.
